S&P revises Nokia outlook

From stable to negative...

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S&P lowered the Finnish firm's rating from stable to negative because of a "marked deterioration of its performance and prospects". Nokia has made three profit warnings since April. The Finnish firm has suffered from its lack of a clamshell design and mid-range camera phone as well as increased competition from other manufacturers.

Leandro de Torres Zabala, credit analyst at S&P, said: "Nokia's mobile-phones operation's market share, profitability, and cash flow generation have eroded materially during the first half of 2004 and pressure is expected to continue in the second half of the year."

Zabala expects Nokia to keep pressure on prices to maintain its leading market share and sales volumes. There will be more pressure on margins from the need for R&D and marketing spend which is needed to "improve handset competiveness".

The decision is unlikely to scare bankers too much because the firm still has cash reserves of €11.5bn. Nokia's overall corporate credit rating remains at "A" - middle of the range. S&P said this could be cut if Nokia's cashflow gets worse. ®